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The broad index gained 1.6 percent Friday, with utilities and energy as the best-performing sectors. It also broke above its 50-day moving average.

The Nasdaq advanced 1.75 percent as shares of Facebook, Amazon, Netflix and Alphabet all rose.

The Dow closed 347 points higher, with Intel as the best-performing stock. For the week, the Dow was slightly higher. It came into the session on pace for a 1 percent decline.

It's been a volatile week for stocks, with the major averages posting strong gains in early trading before closing off those highs.

"We have a champagne problem," said Nick Raich, CEO of The Earnings Scout. "The economy is running too hot and that brings fear of higher rates. But that's better than having to jump-start an economy that's running cold. Earnings expectations are also rising for the first time in seven years," Raich said. "That's a big positive."

The benchmark 10-year U.S. note yield hit a four-year high earlier this week after minutes from the Fed's January meeting showed the central bank sees increased economic growth and an uptick in inflation as justification to continue to raise interest rates gradually. On Friday, the yield traded below that four-year high, near 2.875 percent.

"Investors eye 3 percent on the 10-year with concern as it intersects a trendline that has led to crashes/bear markets since 1980," Thomas Lee, founder and head of research at Fundstrat Global Advisors, said in a note. "But, as we noted a few weeks ago, interest rates are moving higher from ultra-low levels and like 1950s-1960s, this period saw higher rates [and] higher equity prices."

The Fed released its monetary policy report Friday morning, which said the central bank sees the U.S. economy past full employment, albeit with only "moderate" wage gains. The report serves as a blueprint for new Fed Chair Jerome Powell's testimony next week.

Investors also assessed speeches from two voting members of the Fed's policymaking committee. Cleveland Fed President Loretta Mester said inflation should and sustain 2 percent over the next couple of years. New York Fed President William Dudley spoke earlier, saying the central bank's balance sheet drawdown is going smoothly.

The Fed's balance sheet ballooned to more than $4 trillion after the Financial Crisis.

In corporate news, General Mills agreed to buy natural pet food company Blue Buffalo for about $8 billion in cash. Shares of Blue Buffalo surged more than 16 percent.